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HIGHLY CONFIDENTIAL: TO BE SEEN BY TEAM MEMBERS ONLY LAS VEGAS HILTON HOTEL & CASINO http://www.lvhilton.com/ TEAM MEMBERS LAS VEGAS HILTON ERIC WRIGHT General Manager Fire Rock Navajo Casino Church Rock, New Mexico NICOLASS GROES Casino Manager Holland Casino - Leeuwarden Leeuwarden, The Netherlands KIERREN GERSBACH Gaming Machine Product Development Mgr Sky City Entertainment Group Auckland, New Zealand RICHARD CROCCO Executive Director of Finance Grand Sierra Resort and Casino Reno, Nevada EDWARD GILBERT Director of Marketing Feather Falls Casino Oroville, California email@example.com firstname.lastname@example.org email@example.com firstname.lastname@example.org email@example.com SPECIFIC DIRECTIVES AND CHALLENGES FOR LAS VEGAS HILTON FOR PHASE 1 NOTE: THE FOLLOWING INSTRUCTIONS WILL REQUIRE YOU TO HYPOTHESIZE HOW YOUR CASINO PROPERTY HAS CHANGED WITH THE DETERIORATING CIRCUMSTANCES CONFRONTING THE NATIONAL ECONOMY, LAS VEGAS, AND THE PARENT COMPANY FOR YOUR CASINO. ACCURACY IS NOT AS IMPORTANT AS COMING TO QUICK AGREEMENT AMONG TEAM MEMBERS AS TO “WHAT IT WAS LIKE” BEFORE THE CHANGES IN THE ECONOMY, DESCRIBING “WHAT HAS CHANGED FROM THEN TO NOW,” AND THEN SUGGESTING GUIDELINES FOR THE PARTICULAR AREA FOR THE NEXT NINE MONTHS UNDER THE NEW TEAM. FEEL FREE TO USE YOUR IMAGINATIONS AND COLLECTIVE EXPERIENCE THROUGHOUT. The Las Vegas Hilton (LVH) was built originally as the Las Vegas International by Kirk Kerkorian, opening in 1969. At the time, it was touted to be the largest hotel in the world, and it was clearly the largest casino-hotel that existed at that time. In 1971, it was sold to the Hilton Corporation and was rebranded as the Las Vegas Hilton. Located away from the Strip on Paradise Road, from the outset LVH had to develop much of its own business which it continued to do over the years; it did so by taking advantage of its proximity to the Las Vegas Convention Center, adjacent to the Las Vegas Hilton. The property also had an aggressive entertainment policy, and was famous at the venue where Barbra Streisand opened the showroom, Elvis performed for the last six years of his life, Wayne Newton had been a regular, Andre Lloyd Webber produced Starlight Express, and Willie Nelson made regular appearances. In the 1990s, LVH underwrote the development of the Star Trek Experience, including a themed “SpaceQuest” casino within the casino, a Star Trek adventure ride, and a shop that would sell memorabilia, was an attempt to bring in another market demographic. LVH finally closed down the Star Trek Experience in 2008. The Hilton ownership continued for a considerable period of time (under Hilton, Park Place Entertainment, and Caesars Entertainment), but falling EBITDA in the late 1990s encouraged corporate to put the property up for sale. After a failed effort to sell the Las Vegas Hilton to Ed Roski, a Los Angeles developer, in the early part of the decade, the real estate investment firm Colony Capital acquired the property in 2005 for $280 million. At the time, the price was considered a bargain by some, because it included 59 acres along with the 3,000 room hotel facility with all its existing but aging restaurant, retain, and convention facilities. Colony has since spent about $100 million in upgrades, primarily in refurbishing the hotel rooms and public areas within the facility. In some respects LVH is viewed as a tourist and conventioneers’ warehouse, with over 3,000 hotel rooms, most in the three to four star quality. On top of the building are three “Super Suites” that were built by Hilton in the early 1990s at a cost of $40 million to cater to the “whales,” the high rollers primarily from Asia who have a penchant for high stakes baccarat. Though LVH is no longer a serious competitor in the baccarat market (MGM, Wynn, and Venetian capture almost all that business these days), the Super Suites are still very useful for serious high end players at LVH. The challenge for the Las Vegas Hilton has been to keep itself attractive in light of the many new mega-casinos that have been built in Las Vegas, especially along the Strip, since 1989. The recession that began in late 2007 has eroded the operation’s profitability, and there has been a serious deterioration in average daily room rate as well as occupancy rates. The convention trade in Las Vegas has declined dramatically between 2007 and the present, and there are only a few signs that it has begun to recover in 2010. Colony Capital is of course interested in maximizing the profitability of its operations, but their view is that if the property can be positioned for sale in the intermediate future at a reasonable price, that would be consistent with their overall corporate strategy. As a Team, your PHASE 1 tasks are: 1. Identify at least ten key metrics (related to performance of casino games, different departments, customer behavior, perceived customer service levels, cost containment, employee morale, etc.) that will allow you to monitor the performance of this operation over time. These should be linked to overall objectives for managing the property, and should be among the most important for you to make the best strategic decisions relative to your overall objectives into the future. (If you list more than 10, identify your top ten.) 2. As the new Management Team, list (in bullet points) what you believe might have been the basic policies toward employment that prevailed at your property from early 2008 to the present. Use your imagination, prior knowledge of the casino and/or company, and collective experience regarding your own casino or other casinos with which you are familiar to identify some basics of a Human Resources Strategy that may have prevailed over this period. Again using bullet points, note how this strategy may have been modified since early 2008. Given this as a base, and in light of the current competitive and economic conditions in Las Vegas, as well as the company’s broad directives, put forward an HR strategy that will guide your management team over the next nine months or so. This could include consideration of benchmarks, benefits, incentive programs for employees and hosts, and performance evaluation standards. (Keep in mind that you do have some unions to work with, especially the Culinary.) Prepare an internal memorandum of one page or less that will be circulated among your employees that clarifies this strategy. Note separately in one or two sentences what you hope to achieve with this memo. 3. Briefly identify what you believe has been the target market for this casino under the prior management team. Based on the description of events above, use your imagination and collective experience to briefly summarize a marketing strategy that may have been in place at the property between early 2008 and the present. (Use bullet points.) Note how this marketing strategy might have been affected by cost cutting and the broader challenges confronting the Las Vegas gaming industry. Then recommend a marketing strategy that will drive the property forward over the next nine months. In particular, identify your target market(s) and try to include clever and cost-effective ways of increasing market share and growing revenues without overly taxing operating budgets. Summarize this marketing strategy in one or two paragraphs. 4. A freeze has been in place since August 2008 for any capital outlays beyond necessary replacement of non-functioning or damaged equipment. As a result, there is deferred maintenance that has built up on a variety of assets, including carpets, walls (in need of painting), furniture and fixtures, software systems, and gaming equipment. For the next nine months, corporate has indicated you will have $15 million that can be allocated to capital outlay needs. Drawing from your imagination and collective experience, discuss a strategy that you will use in allocating this amount to various areas within the facility. 5. Write a one paragraph position strategy1 that explains how you might want the property to be perceived by the public. This statement should explain who your target audience is, your thematic premise, your service promise, your pricing standards, and a statement of your quality objectives. Try to be as specific as you are able in addressing the above issues, and keep in mind the budget constraints and performance challenges for the property at the present time and over the next nine months. A written response to the above inquiries is due no later than 10 am Saturday, November 7. The response should be no more than five (5) type-written pages (Times New Roman, 10 point, single spaced.) It must be e-mailed to the following address: firstname.lastname@example.org . Once a team has submitted its PHASE 1 report, the team members will receive their PHASE 2 instructions. Note that PHASE 1 submissions will be competitively graded and the results will be reflected in the Casino Resort’s future performance indicators. If the Team wants their PHASE 2 instructions before Saturday morning, they need to submit the PHASE 1 report no later than 9 pm Friday, November 6. 1 Generic example of a Position Strategy: Our casino will target, attract and host low premium and qualified high grind gamblers by providing very professional, yet “small town” style, guest service from highly-trained and motivated team members in a Western- themed, very exciting, extremely clean and secure casino/hotel environment that features very good quality food and entertainment products at low to moderate prices. We will be committed to make the guest feel lucky for having chosen our casino! DESCRIPTION As the place where the Elvis Presley broke all Vegas show attendance records when it was still called the International Hotel, The Las Vegas Hilton is a time capsule of classic Vegas. While the feeling is traditional, the hotel has recently gone through renovations. From the front desk to the guest rooms, all surfaces were remodeled. Crystal chandeliers hang from the ceiling of the 74,000 square-foot casino, where there is glass-encased high limit table room with high limit slots. Just off from the casino, there is a one of the largest sports book on the Strip with 400 seats, 42 televisions and 30 big screens. The dining choices at the Las Vegas Hilton range from the award-winning Benihana, a Japanese steakhouse, to The Buffet, where guests can enjoy the wide selection of choices. After dinner, guests can take advantage of the star-studded entertainment at Hilton, with Barry Manilow at the Hilton Theater or a variety show with Las Vegas favorites, the Scintas. The Hilton also makes it convenient to casino-hop as one of the stops on the Las Vegas Monorail. Attractions Las Vegas Hilton Pool There is no better way to beat the Vegas heat than at the Las Vegas Hilton pool! Located outside the 3rd Floor, the Hilton's pool is the perfect place to relax in a cabana, sip on cocktails from the Cabana Bar, and enjoy an unprecedented Strip skyline view! Don't forget to check out the daily Cool by the Pool Happy Hour for 2-for-1 drinks, food specials and live entertainment. Spa at Las Vegas Hilton Relax, revive, and rejuvenate in the spa at the Las Vegas Hilton. Tucked away on the third-floor recreation deck, this tranquil hideaway offers a delightful and rewarding Las Vegas spa vacation destination. Choose from a bountiful assortment of treatments -- including traditional Swedish massages, soothing body skin treatments, and cleansing facials. Tone up in our state-of-the-art fitness center -- under the watchful eyes of our exercise professionals – and then reward yourself with an afternoon snooze in a poolside cabana. Invigorating and inspiring, the Las Vegas Hilton invites you to discover a tranquil Off-Strip hideaway among Las Vegas spa resorts. Tennis The Las Vegas Hilton boasts one of the best Las Vegas tennis clubs, complete with a pro shop and beginner and intermediate classes. Amenities Sports Book Seats 300. 28 televisions. Poker Room Health club Part of Spa Spa The Spa Shopping Center Wedding Chapel La Bella Chapel Convention Facilities 200,000 square feet of meeting space Business Center Hotel Room Internet $13.99 Casino Wireless Internet $13.99 Wheelchair Accessible Rooms RV Park Child Care Pets Allowed Self Parking Garage Valet Parking Free. Airport Shuttle Remote Baggage Check-in On Site Catering Call for details. Movie Theater Arcade Bowling Alley Non-Smoking Gaming Players Club Resorts Destination Casino Club Buffet Buffet Arena Nightclub & Bars Tempo Rhythmically combining international spirits, the latest music and tableside bottle service, Tempo is the place to be if you need a new pace on the Strip. Dining 888 Noodle Bar Benihana Casa Nicola at the Las Vegas Hilton Chaises Snack Bar Fortuna at the Las Vegas Hilton Garden of the Dragon at Las Vegas Hilton Perks Place Superbook Deli Teru Sushi The Ice Cream Shoppe TJ's Steakhouse Gaming Machines - 1,310 total Anchor's Wheel of Gold - $.25, 19 machines - $0.25 to $0.75 bets Anchor's Wheel of Gold - $5.00, 2 machines - $5.00 to $15.00 bets Betty Boop's Big Hit Cool Millions Dollar Slot Dollar Slots, 181 machines Five Dollar Slots, 28 machines Half Dollar Slots, 3 machines Hundred Dollar Slots, 6 machines IGT - Megabucks, 6 machines IGT - Wheel of Fortune Progressive Dollar Slots - $0.25/$1.00 minimum bet IGT Austin Powers Video Slots IGT Elvis - $0.25/$1.00 minimum bet IGT Jeopardy - $0.25 minimum bet IGT Nickels Deluxe - $0.05 minimum bet IGT Party Time - $0.25 minimum bet Multi-denomination Slots, 44 machines Nickel Slots, 193 machines Other Slots, 3 machines Penny Slots, 427 machines Quarter Slots, 408 machines Slots - $100 Per-Pull Slots - $25 Per-Pull Twenty Five Dollar Slots, 11 machines Video Blackjack Video Keno Video Poker Table and Poker Games - 66 total 3 Card Poker, 5 tables Baccarat, 2 tables Blackjack, 34 tables Craps, 5 tables Let it Ride, 1 table Mini-Baccarat, 5 tables Other Games, 5 tables Pai Gow Poker, 3 tables Roulette, 5 tables Spanish 21, 2 tables Wheel-of-Fortune, 1 table Other Gaming Race Book Sports Book Review It's easy for us to overlook this dinosaur -- look, we even called it a dinosaur. Totally unfair. It's one of the last of the dying breed of old Vegas hotels, but unlike many of its peers, it's still offering fine accommodations and even a bit more than that. A good place for adults -- we mean that in a good way -- looking for Vegas fun, all the better with yet another room renovation. The overall vibe is still old-school Vegas -- we mean that in a good way -- with an old-fashioned glitzy casino that is small enough to navigate without a GPS device. Consider it even if you aren't an old-timer, and don't be put off by the distance from the Strip; the monorail stops here, making access easier than ever. When you consider that on nights when you can't touch a room on the Strip for less than $175, the Hilton will put you in a nice room with plenty of marble and clean, well-maintained furnishings for a decent price, it seems silly to not make the Hilton a top choice more often. The clientele is a mix of savvy business travelers who know a good hotel deal when they see it. There are quite a few solidly good restaurants, too. Those very same facilities, however, mean that even a small convention can sometimes drive the prices up at odd times -- then again, since conventions are often booked for weekdays, an atypical drop in price can occur on weekends. Just call or look at the website. The recently renovated, generously sized rooms do look fresh and include very good pillow-top mattresses and excellent amenities. Baths are smallish but do have nifty oval tubs. Upgrading to club level gets some complementary food and beverages served in a grown-up lounge. The Hilton has a strong showing of restaurants, including TJ's Steakhouse, a Benihana, and a buffet. The Shimmer Cabaret, a first-rate casino lounge/nightclub, has live entertainment and ongoing shows nightly. It's a great place to hang out in the evening, when it features regular sets by local cover bands. One of Elvis's sequined jumpsuits is enshrined in a glass case in the front, near the entrance to the lobby/casino (he played 837 sold-out shows here and Colonel Tom Parker's memorial service was held here in the hotel). There's also a major showroom, featuring resident headliner Barry Manilow and other guest performers. The third-floor roof comprises a well-landscaped 8-acre recreation deck with a large swimming pool, a 24- seat whirlpool spa, six Har-Tru tennis courts lit for night play, and more. Also on this level is a luxurious 17,000-square-foot state-of-the-art health club offering Nautilus equipment, Lifecycles, treadmills, rowing machines, three whirlpool spas, steam, sauna, massage, and tanning beds. There's a $20-per-day fee to use the facilities, but guests are totally pampered: All toiletries are provided; there are comfortable TV lounges; complimentary bottled waters and juices are served in the canteen; and treatments include facials and oxygen pep-ups. Discounts on health club fees are available for multiple-day use. Facilities: 8 restaurants; food courts; casino; showrooms; outdoor pool; 6 night-lit tennis courts; health club; spa; video-game arcade; car-rental desk; business center; shopping arcade; salon; 24-hr. room service; laundry service; dry cleaning; executive-level rooms FINANCIAL INFORMATION LAS VEGAS HILTON HOTEL AND CASINO CONDENSED STATEMENT OF OPERATIONS (Unaudited, in thousands) Twelve Months Ended December 31, 2006 2007 2008 2009 REVENUES: Casino $ 151,516 158,492 141,564 127,876 Rooms 123,871 133,821 124,071 100,520 Food 91,764 92,897 91,764 79,301 Beverage (includes entertainment) 31,289 34,526 32,368 30,006 Other 26,985 29,480 24,384 21,056 Total revenues 425,425 449,216 414,151 358,759 Less-promotional allowances 28,030 30,906 29,728 25,319 Net revenues $ 397,395 418,310 384,423 333,440 COSTS AND EXPENSES: Direct costs and expenses of operating departments: Casino 91,667 95,254 84,797 76,086 Rooms 39,639 42,154 38,462 32,367 Food 79,835 81,285 80,293 68,596 Beverage (includes entertainment) 17,929 19,956 18,256 16,743 Other 16,353 17,275 14,484 12,065 General and administrative ǂ 83,383 86,699 75,375 63,859 Total costs and expenses $ 328,805 342,622 311,667 269,717 INCOME (LOSS) FROM OPERATIONS $ 68,589 75,688 72,755 63,723 EBITDA 97,518 104,438 105,059 91,706 Depreciation and amortization 28,929 28,750 32,304 27,983 Interest expense* 38,561 37,946 37,509 36,043 NET (LOSS) INCOME $ 1,099 8,992 2,942 -303 ǂ Excluding interest, but including Depreciation and Amortization LAS VEGAS HILTON GGR PERFORMANCE SINCE JANUARY 2009 January-09 11,452 -18.12% February-09 10,083 -14.48% March-09 11,470 -11.23% April-09 10,601 -14.01% May-09 10,439 -9.88% June-09 9,878 -12.16% July-09 10,787 -9.72% August-09 9,037 -16.64% September-09 11,210 -6.03% October-09 11,277 -2.96% November-09 10,588 -0.92% December-09 11,054 3.44% January-10 11,019 -3.79% February-10 9,881 -2.00% March-10 10,624 -7.37% April-10 9,917 -6.45% May-10 9,675 -7.31% June-10 9,437 -4.47% July-10 10,336 -4.18% August-10 8,603 -4.80% FISCAL YEAR PERFORMANCE (through June 30) Avg HOTEL Daily ROOM Room Occupanc Room Food Beverage S Rate y Revenues Revenues Revenues $128.7 $123,871,07 $91,763,84 $31,289,26 2006 2,956 0 89.21% 5 7 0 $138.6 $133,821,32 $92,896,73 $34,526,08 2007 2,956 0 89.49% 5 4 0 $131.4 $124,070,97 $91,763,84 $32,368,20 2008 2,956 0 87.51% 5 7 0 $112.5 $100,520,10 $79,301,36 $30,005,92 2009 2,936 0 83.38% 0 0 0 $109.5 $82,473,41 $31,806,27 2010 2,936 5 84.56% $99,271,886 4 5 EMPLOYMENT (AS OF JUNE 30) Casino Room Food Beverage G&A Other TOTAL 2006 664 519 773 165 292 428 2,841 2007 656 503 718 191 318 397 2,782 2008 677 534 772 207 294 411 2,895 2009 645 506 740 199 279 378 2,748 2010 680 534 780 210 295 399 2,897 LAS VEGAS STRIP $72 million and above ECONOMIC PERFORMANCE INDICATORS, 2006-2010 EMPLOYMENT STATISTICS (as of June) Other Casino dept Rooms Dept. Food Dept. Bev. Dept. Depts. G&A TOTAL 2006 23,357 18,267 27,199 5,788 10,274 15,065 99,950 2007 22,477 17,207 24,599 6,526 10,872 13,591 95,272 2008 23,178 18,284 26,435 7,078 10,048 14,057 99,080 2009 21,602 16,968 24,796 6,667 9,365 12,679 92,077 2010 23,601 18,538 27,091 7,285 10,232 13,853 100,600 DEPARTMENTAL MARGINS Other Casino Dept. Rooms Dept. Food Dept. Bev. Dept. Depts. 2006 40.5% 67.0% 12.0% 41.7% 39.4% 2007 40.8% 69.2% 10.3% 42.7% 35.6% 2008 38.3% 67.6% 17.1% 41.1% 42.8% 2009 41.0% 66.5% 18.3% 41.5% 42.1% 2010 39.5% 67.5% 17.3% 42.1% 39.8% GROSS GAMING Las REVENUES Vegas Baccarat ($000s) Strip LVS ($ 72 m+) ($72 m+) MONTH January-06 583,667 91,009 February-06 509,885 79,454 March-06 494,425 35,959 April-06 473,866 55,358 May-06 555,052 86,882 June-06 414,148 41,413 July-06 490,023 52,484 August-06 511,002 75,609 September-06 470,928 55,074 October-06 486,147 29,236 November-06 599,961 117,242 December-06 574,658 114,081 January-07 562,325 90,757 February-07 535,671 117,039 March-07 497,300 36,039 April-07 486,973 60,354 May-07 560,421 71,237 June-07 460,517 44,361 Las Vegas Baccarat Strip LVS ($ 72 m+) ($72 m+) July-07 565,189 72,209 August-07 492,126 70,349 September-07 509,096 45,640 October-07 594,608 108,107 November-07 485,326 46,961 December-07 580,892 140,354 January-08 559,728 80,983 February-08 519,870 116,335 March-08 477,018 34,766 April-08 481,158 59,184 May-08 465,935 69,445 June-08 430,187 45,224 July-08 461,287 52,311 August-08 442,886 71,837 September-08 484,923 76,618 October-08 438,300 40,500 November-08 405,552 39,780 December-08 443,922 78,129 January-09 479,937 96,169 February-09 395,360 57,490 March-09 417,854 33,496 April-09 407,932 52,681 May-09 446,033 96,224 June-09 378,734 47,704 July-09 429,707 68,228 August-09 412,333 109,515 September-09 446,129 70,489 October-09 420,435 42,525 November-09 395,772 40,973 December-09 507,349 97,661 January-10 555,811 129,828 February-10 463,288 74,737 March-10 452,798 41,535 April-10 447,807 60,583 May-10 493,263 115,469 June-10 422,303 54,860 July-10 479,225 74,369 August-10 438,300 93,088 NEWS CLIPS ON THE LAS VEGAS HILTON Off-Strip location made Hilton one of LV’s biggest gambles Sun Staff Wednesday, July 12, 2000 The Las Vegas Hilton was the biggest hotel in the world when it opened as the International Hotel in 1969 - - and it was considered the biggest gamble taken by a casino operator. Billionaire Kirk Kerkorian's three-winged tower opened with 1,512 rooms, and the old-time gamers wondered aloud who would fill those rooms. Not only were there too many of them, but the property was off the Strip -- away from the action, they noted. By the time Barron Hilton and his Hilton Corp. purchased the massive property in 1973, the critics had been proven partly right by the International's uneven performance in its first four years. But within a couple of years of the sale, the Las Vegas Hilton was filling its rooms and quieting the critics. The hotel quickly established itself as a resort capable of drawing big-name entertainers. Singer Barbra Streisand opened the hotel, making $1 million for her twice nightly performances for the month -- then considered a fortune for a Las Vegas entertainer. Actor Cary Grant and basketball star Wilt Chamberlain, with 2,000 other VIPs, saw the show. Elvis Presley followed Streisand a month later, eventually establishing the International and later the Hilton as the King's Las Vegas home. The Hilton's headliners also included Wayne Newton, who played the Hilton from 1987 until 1993, Lou Rawls, Bill Cosby, Nancy Wilson, Liberace, the Monkeys and the road show of "Hair." Recently it has developed a reputation for country music headliners. But in local memory, the Hilton is known as much for fire and scandal as spotlights. On Feb. 10, 1981, a fire at the Hilton killed eight people and hurt more than 200. The blaze came only months after the worst fire in Las Vegas history, at the MGM Grand hotel-casino, which killed 87 people and injured more than 700. At the Hilton, where damages reached $13 million, a busboy had torched an eighth-floor lobby curtain with a marijuana cigarette. Philip Bruce Cline was convicted of arson and received eight life sentences plus 15 years as punishment. In the wake of those two fires, resorts were required to retrofit fire-safety measures such as sprinklers in rooms. From the ashes rose a bigger and better Hilton. Boasting the tallest sign in the world at 362 feet, the Hilton's peak attraction came crashing down in a July 1994 summer storm. The new sign rises 262 feet and cost $6 million to replace. A national scandal brought more unwanted attention to the Hilton. In 1991 Navy Lt. Paula Coughlin charged that naval aviators attending the Tailhook Association convention at the Hilton that year sexually assaulted her in a hallway as part of an organized system of drinking and abusing women. Her descriptions of the drunken escapades at the hotel during the convention eventually brought forward other tales from as many as 80 women that they had been groped by drunken military pilots. Coughlin eventually left the Navy and sued, winning $400,000 from the Tailhook Association and $6.8 million from the Hilton. The hotel appealed, and the award was reduced to $5.2 million. Six women settled with the San Diego-based Tailhook Association in 1995. The scandal gave the Navy a black eye, triggered the resignation of Navy Secretary H. Lawrence Garrett and changed the way aviators were promoted, requiring extra scrutiny of anyone who had attended the convention. In the mid-1990s the Hilton began a move to its current look, adding attractions from a laser light show to Star Trek as other hotels along the famed Strip became themed resorts. In 1996 the Hilton paired with Paramount Parks to build "Star Trek: The Experience" ushered in by laser shows, flaming signs and fireworks. The $50 million simulator ride opened in February 1997. In addition to finding a theme, the Hilton also attracted its share of sports greats. Mike Tyson beat Frank Bruno there in 1989. Michael Carbajal knocked out junior flyweight champ Humberto Gonzalez there in 1993. And golf champion Tiger Woods played at the Las Vegas Hilton Country Club in 1996. Las Vegas Hilton sticking with convention marketing strategy By Liz Benston LAS VEGAS SUN Tuesday, March 4, 2003 Park Place Entertainment Corp. expects to focus on driving convention business to its Las Vegas Hilton property, officials said today following an announcement that the company had settled long-standing litigation initiated after a failed deal to sell the property more than two years ago. Park Place said Monday it had settled lawsuits involving Los Angeles developer Ed Roski Jr. that originated when Roski failed to close on the sale of the Las Vegas Hilton by a January 2001 deadline. Terms of the agreement were confidential, but Park Place said it would take a one-time charge of $3.8 million for the fourth quarter as a result of the settlement. "Clearly there are some high-end players ... but our principal focus is on a convention and business hotel, given its prime location next to the Las Vegas Convention Center," Park Place spokesman Robert Stewart said. Stewart declined to say whether the company would consider selling the property at some point in the future. "We're delighted that this thing is settled and can move forward with assessing plans for the property," he said. Park Place is expected to continue its convention strategy -- a position it established when it initiated the lawsuit against Roski, Deutche Bank Securities casino analyst Marc Falcone said. "I think that's the course they will still take, to try and maximize the operations of the property through the benefits of the expanded convention center," Falcone said. The expanded Las Vegas Convention Center is adjacent to the Hilton. The company may still try to unload the property, he said. "I think if the company was approached with the right offer I think they would consider it. But only at the right price." "I don't think this changes anything," McDonald Investments analyst Dennis Forst said of the settlement. "All things being equal I think they would probably try to sell -- but that hasn't worked in the past," he said. The Las Vegas Hilton was the world's biggest hotel when it opened in 1969 as the International Hotel but it's off-Strip location was also called a major gamble. Billionaire Kirk Kerkorian's property was sold to Hilton in 1973, which then spun off the property and other gaming holdings to Park Place in 1998. The hotel has since been challenged by newer and more lavish resorts on the Strip that are also hosting convention-goers. It generates a fraction of Park Place's overall cash flow in the region. The property, along with the Reno Hilton, Caesars Tahoe and the Flamingo Laughlin, recorded a combined $62 million in cash flow last year. Including the Flamingo Reno, which was sold in late 2001, the properties reported $60 million in cash flow a year earlier. Cash flow, typically defined as earnings before interest, taxes, depreciation and amortization, is a key indicator of casino performance. By comparison, the company's Flamingo Las Vegas yielded $91 million in cash flow, Caesars Palace reported $81 million and the combined Paris-Bally's properties reported $189 million. Cash flow margins improved at the Hilton in the fourth quarter, the company said in an earnings statement last month. The failed sale hasn't tainted the property's future prospects, said Carlton Geer, director of commercial broker CB Richard Ellis' Global Gaming Group in Las Vegas. "I see some good things happening for them in the future with the monorail, the business that's driven by Paradise (Road) and the development at (nearby luxury condo tower) Turnberry Place," Geer said. Park Place's new chief executive, Wallace Barr, appears to be focusing on improving property performance and cross-marketing strategies, he said. Barr replaced Thomas Gallagher, who resigned under pressure in November and amid concerns about the company's falling stock price. Gallagher, former general counsel for Hilton Hotels, replaced Arthur Goldberg after Goldberg's death in 2000. Casino transactions have long escrow periods, which can complicate financing deals if the value of the asset changes during that time, Geer said. "Transactions not closing isn't unique. The significance is that (the Las Vegas Hilton) was such a large transaction and a historical asset in Las Vegas." Both parties expressed satisfaction with the settlement. "We are pleased to announce that the parties have reached an amicable settlement of the litigation related to the Las Vegas Hilton," Park Place Senior Vice President and General Counsel Bernard DeLury said in a statement Monday. "We're pleased by the outcome," added Craig Cavileer, general manager of the Silverton casino hotel in Las Vegas. Roski owns the Silverton and has a stake in the Staples Center in Los Angeles as well as the Los Angeles Kings and Los Angeles Lakers professional sports teams. His Majestic Realty Co. develops business parks nationwide. Roski is focusing on developing a mixed use casino and retail project on 100 acres he owns next to the Silverton and will continue remodeling projects begun last year at the property, Cavileer said. They will include $22 million of room renovations as well as upgraded restaurants and bars, he said. Park Place agreed to sell the Las Vegas Hilton to Roski for $365 million in 2000, expecting to take a $32 million non-cash loss on the sale. Goldberg, who was chief executive at the time, said the sale of the Las Vegas Hilton would allow the company to "consolidate its high-end gaming operations" at Caesars Palace. Park Place acquired Caesars Palace in 1999 when it bought the Caesars World Inc. chain. The flagship property competed with the Las Vegas Hilton for high-rollers, analysts had said. Park Place fired off the first legal shot in January 2001, accusing Roski of breach of contract in federal and state lawsuits. Park Place asked for a declaratory judgment entitling it to keep Roski's $20 million deposit. The company also asked for more than $20 million in damages. Roski immediately filed a countersuit in state court, accusing Park Place of breach of contract over a "significant and substantial downward trend" in cash flow at the Las Vegas Hilton, thwarting financing for the deal. Roski also asked for unspecified damages. Much of the Las Vegas Hilton's high-end business had been moved to other Park Place properties in anticipation of the deal. The purchase contract called for Park Place to retain all of its high-end customers. Roski also claims that he was to have received $30 million in financing from Park Place and that Hilton Hotels and its chairman, Barron Hilton, interfered with Goldberg's agreement to sell the hotel. Hilton Hotels had been an unsuccessful bidder on the property, Roski said. Hilton and its chairman attempted to block the sale, finding it offensive that Park Place would sell what had been Hilton's flagship brand in Las Vegas, he said. Roski's suit accused Hilton Hotels of exerting influence over Park Place after Goldberg's death by installing a management group dominated by officers loyal to Hilton. The two companies maintain close ties, with Hilton Chief Executive Stephen Bollenbach serving as board chairman of Park Place and Hilton board members Barron Hilton and Steven Crown also serving on Park Place's board. Sources said that Roski had also held unsuccessful talks with financier Carl Icahn, now the owner of the Stratosphere, and International Game Technology Chairman Chuck Mathewson about becoming equity partners in the property. Roski had aimed to reposition the Las Vegas Hilton from a high-end casino to a mid-level property and also had plans to boost its casino, food and entertainment offerings to attract more locals and compete with neighborhood casinos on the Boulder Strip. Roski also wanted to retain convention traffic generated by the adjacent Las Vegas Convention Center. Federal securities laws require Park Place to record the one-time charge in the fourth quarter of the previous year because it has not yet filed its annual report with the Securities and Exchange Commission. Including the charge, the company reported a net loss of $21 million, or 7 cents per share, in the fourth quarter. That compares to a loss of $18 million, or 6 cents per share, without the charge as reported informally last month. Adjusted earnings, which exclude one-time charges, remain the same at $16 million, or 5 cents per share. Park Place to sell LV Hilton By Liz Benston LAS VEGAS SUN Wednesday, Dec. 24, 2003 Park Place Entertainment Corp. today agreed to sell its struggling Las Vegas Hilton to an affiliate of Colony Capital LLC for about $280 million. The transaction is expected to close by the end of June. Colony Capital, a Los Angeles-based real estate investment firm, said it expects to enter into an agreement with Hilton Hotels Corp. -- which owns the rights to the Hilton brand -- to allow the property to continue using the Hilton name, the companies said. Colony also said it intends to continue operating the Las Vegas Hilton as a hotel-casino but may build additional structures on vacant land at the site. The future status of the Hilton's staff was unknown. It was unclear early today whether Colony would retain the Star Trek Experience attraction at the property. Park Place said it intends to use the proceeds from the sale -- estimated at $256 million after taxes -- to reduce debt. The company expects to report a gain on the sale of about $85 million after taxes, or 28 cents per share, in the quarter in which the transaction closes. Expenses have exceeded cash flow at the Las Vegas Hilton for at least the past two years, dragging down earnings at Park Place. The company's Chief Executive Wally Barr has expressed interest in selling off non-core assets nationwide. Colony Capital was attracted to the real estate potential of the Las Vegas Hilton site, according to a source who worked on the transaction and declined to be identified. The off-Strip resort sits on 56 acres, including undeveloped land that could be used to realign traffic flow and build hotel towers, timeshares, condominiums and even retail, industry insiders said. "Many of the investors consider this to be a combination of a casino and real estate play," the unnamed source said. "They were looking at ways to use the assets to maximize returns by using the land around the Las Vegas Hilton as the land becomes more valuable. Colony Capital likes to invest in this kind of asset." "The hotel-casino and the prime real estate on which it sits are truly irreplaceable assets," Colony Capital Chairman and Chief Executive Thomas J. Barrack Jr. said in a statement. "We look forward to this opportunity to further enhance and reposition the property." Colony Capital representatives could not be reached for further comment. Colony is one of the world's largest REITs and is known for buying distressed assets. The company bought Resorts International in Atlantic City and sold the Harvey’s Casino Resorts chain to Harrah's Entertainment Inc. in deals announced in 2001. It was also a suitor of the bankrupt Aladdin resort, which was eventually sold to another party. Casino entrepreneur Nicholas Ribis, vice chairman of Resorts International, will be a partner in the Las Vegas Hilton acquisition, Park Place said. Other bidders on the Las Vegas Hilton included Richard Alter, managing director of Financial Capital Investment Co. and another Aladdin suitor; timeshare developer Crescent Heights; and Marriott International, another interested bidder of the Aladdin. Real estate investor Carl Icahn also was interested in buying the Las Vegas Hilton but forwarded an offer that was too low to make the next round in the bidding process, sources said. Extreme makeover By Liz Benston LAS VEGAS SUN Monday, Nov. 7, 2005 Customers arriving at the Las Vegas Hilton are now met with scaffolding, drywall and a construction crew in the lobby as the 36-year-old property undergoes a makeover designed to make it look decades younger. Construction walls at the rear of the casino feature photos of leggy models assuring visitors that the work going on behind the scenes "won't detour your fun." Another sign says, "Caution: Bright future ahead." The Las Vegas Hilton, still months away from revealing its new self, has a lot to gain from the millions of dollars its new owners are plowing into the off-Strip hotel. Colony Capital paid $280 million last year to buy the 59-acre Hilton site from Caesars Entertainment. In a recent interview with In Business Las Vegas, a sister publication of the Las Vegas Sun, Resorts International Chief Operating Officer Roger Wagner called the Las Vegas Hilton "the buy of the century." "You couldn't replace this building for a billion dollars," Wagner said. Built by MGM Grand founder and MGM Mirage shareholder Kirk Kerkorian, the Las Vegas Hilton, then called the International, was then the world's largest hotel and home to resident entertainer Elvis Presley. It fell out of the limelight as newer resorts sprouted on the Strip and stagnated in recent years under Caesars Entertainment, which had attempted to sell the property to focus on its better-performing Strip casinos. Colony snapped up the Hilton at a deflated price and has begun work on a five-year master plan to spiff up the property and use its land more effectively. Colony in July created a new holding company to operate its six casinos, including the Hilton. Resorts International Holdings also owns Resorts Atlantic City as well as four properties purchased from Caesars Entertainment and Harrah's Entertainment prior to Harrah's buyout of Caesars. Those include the Atlantic City Hilton, Resorts East Chicago, Resorts Tunica and Bally's Tunica. The casino holding company's headquarters is the Las Vegas Hilton. The company has already tripled annual cash flow at the property since Caesars owned it and has revived the casino's high roller business, Wagner said. The company is pushing to attract international players, particularly high rollers from Latin America. And it expects to create a frequent gambler program next year that would allow players to rack up points across Resorts' six casinos. The remodeling effort, expected to cost more than $20 million, will include a new porte-cochere, outdoor landscaping, a remodeled lobby and front desk, a lounge, coffee bar and upgraded casino floor. All of the work is expected to be complete by the end of December. The finished lobby will feature sparkled marble imported from Italy and Spain, incandescent lighting instead of fluorescent lights and a more upscale front desk with flat-screen TVs. While the casino will retain its signature crystal chandeliers, new carpeting will be put in along with new wall coverings and column finishings. Some slot machines also will be moved around to make it easier to walk through the casino and create a more inviting atmosphere for customers entering from the lobby. Employees also will wear new uniforms. The Hilton's main casino bar will be replaced by Tempo, an ultramodern bar and lounge with 100 seats and a private area for high rollers in the style of a Strip ultralounge. The property's Perk Place coffee bar and deli will be replaced by Fortuna, a coffee, wine and pastry bar resembling a luxurious Starbucks. The coffee bar will also offer Internet access. Upstairs, workers have finished upgrading many of the Hilton's more luxurious suites. The property's Lanai and Director suites feature plasma TVs, new marble floors and showers, granite vanity tops and rain shower heads as well as a private terrace. Of the Hilton's 3,000 or so total rooms, about 300 are suites. Sometime next year, the first series of regular rooms will be remodeled. Being a private company has its advantages, Wagner said. "If we want to do something that's disruptive that we think will help us in the long term, we can do that without retribution" from shareholders, he said. When the company bought the Hilton in June 2004, Colony officials said at the time they expected to spend about $70 million on improvements. In September the property opened a new poker room, replacing several banks of slot machines in what had once been the site of a shuttered poker room years ago. Shortly after Colony bought the hotel, the owners upgraded the Superbook, the country's largest sports book, including the installation of small LCD screens for players and more comfortable chairs. Still to be done is more remodeling near the convention center. The Hilton's steakhouse will be remodeled, as will the Plaza Bar and the Shimmer entertainment cabaret. Shimmer, formerly a nightclub, is now home to comedian David Brenner as well as other entertainment acts. Last year the Hilton announced a deal with singer Barry Manilow to become a resident headliner at the Hilton Theater into 2006. "Barry is a huge marquee value for us around the country right now," Wagner said. "This property, being off the Strip, needed something to use as a destination marketing device ... The community is talking about Barry Manilow in the same vein as Celine Dion." The Hilton is also hoping to better capitalize on its "Star Trek" attraction, which includes a tour and ride operated in partnership with Paramount Pictures. There are a few years left in the contract with Paramount. The property hasn't decided whether to keep the attraction longer term, Wagner said. The attraction is located near the Space Quest casino, a themed casino floor primarily fed by traffic from the Las Vegas Monorail stop. Most people coming into the property from the monorail tend to be occasional visitors to Las Vegas rather than regulars, Wagner said. That may change once more people begin to use the service and it extends to the airport. The company is still working on a master plan for the Hilton's 59-acre site. About 50 of those acres are vacant or underdeveloped, Wagner said. "We are looking at all kinds of ways to stick our front door closer to where people are wandering around," he said. "Whether that means we'll build a boutique hotel right next to the convention center by the end of the property and knock something down, I don't know. We haven't made any decisions there. We've got all kinds of opportunities." The Hilton owners are shying away from condominiums, even though plans for about 100 high- rise condos are sprouting across the Las Vegas Valley. "There's only so many high-end people," Wagner said. "Some of the ones coming out of the ground are selling to investors who think they can spin these things off. The cost of labor and construction and the cost of goods, especially with the Katrina problem now, is going to put these developers in a position where what they sold them for today will not cover what it will cost to build them three years from now when they have to deliver the product." From dieiscast.com (2008 postings): It looks like Star Trek: The Experience might be leaving the Las Vegas Hilton. From the LVRJ: The lease on the biggest nerd magnet since the International Consumer Electronics Show expires at the end of the year, and a spokesperson for owners Cedar Fair Entertainment Co. told the Web site TrekMovie.com “there are currently no plans to renew” it. If Cedar Fair were to beam Experience out of the Hilton, it could mark the demise of a 10-year run that has made Las Vegas the center of the universe for fans of the seminal science fiction franchise. … The lease on the biggest nerd magnet since the International Consumer Electronics Show expires at the end of the year, and a spokesperson for owners Cedar Fair Entertainment Co. told the Web site TrekMovie.com “there are currently no plans to renew” it. If Cedar Fair were to beam Experience out of the Hilton, it could mark the demise of a 10-year run that has made Las Vegas the center of the universe for fans of the seminal science fiction franchise. Experience Ending: Hilton Star Trek attraction may seek out new life elsewhere The Experience isn’t cheap: it costs $37.99 for two rides and access to the museum, which I think is the most interesting part of the whole place. It would be a shame to see the Experience close, since it obviously caters to a demographic that many other Vegas outlets don’t: TrekMovie.com editor-in-chief Anthony Pascale stopped short of saying Experience would bolt, but he said it didn’t look good for Trekkies who make a pilgrimage to the Hilton as part of their Las Vegas vacations. “It is the premiere, and right now only, live Star Trek attraction in the world,” Pascale said. “A lot of nerd weddings go on at that place.” My biggest problem with ST:TE is not with the attraction itself, but with the Hilton’s SpaceQuest casino. That’s the section of the casino that surrounds ST:TE. I don’t think they did a very good job of giving the SpaceQuest casino a Star Trek look. It’s just generic space-looking, with no design elements from any of the Star Trek shows or movies at all. And out of all of the artifacts from the show they could have used in the display cases, the most prominent one they used was the salt monster from an early episode of the original series–not exactly a recognizable icon. When you imagine the potential, it’s a real let-down. That being said, I’d like to see the Hilton and Cedar Fair not only keep ST:TE, but upgrade it. I think it’s just good business. You’d have to work pretty hard to find an attraction that would have the same immediate draw as a Star Trek one–you figure each Trekkie who comes to Vegas has to visit it at least once. In an industry that is warming up to the value of branding, an association with one of the entertainment world’s most recognizable brands seems to be a slam dunk. I don’t think so, you might say. The Trek franchise is moribund–the last show went off the air three years ago. Yes, but I think that it’s due for a revival. There’s a new movie in production, due to open next May. And it’s a complete re-start of the franchise: J. J. Abrams, the creative force behind Lost, is directing it, so I’d expect something really, really good. Closing the attraction a few months before a major movie’s released just seems so obviously short-sighted to me. Why not just extend the agreement for another year, at the very least, or commit some money to tweak the museum and, just maybe, develop a new ride that ties in with the movie? Jul. 21, 2009 Lienholder: Live long and pay up By BENJAMIN SPILLMAN, LAS VEGAS REVIEW-JOURNAL If only "Star Trek: The Experience" had been created in a holodeck, the Las Vegas Hilton might have avoided a construction lien. Unfortunately the attraction was made from wood, plastic and other materials that cost money to remove, unlike the lifelike scenes generated by computer in the holodeck on the Enterprise, the spaceship in the science fiction television series, that appeared and disappeared instantly and on command. The Las Vegas construction company that removed hardware from "Star Trek: The Experience" and restored the space has placed a lien against the Hilton over claims it wasn't paid for the work. According to documents in district court in Clark County, Quality Choice Construction says it is owed nearly $523,000. In two separate filings the company says Cedar Fair Entertainment Co., former operators of the attraction, and Rohit Joshi, the Neonopolis developer who intends to install the exhibit downtown, were supposed to pay for the project. A lawyer for Quality Choice says the liens were placed against the Hilton because the property benefited from the work. "We did the work, we didn't get paid, we have a lien against the property until we get paid," attorney Bruce Willoughby said. A representative for Cedar Fair wasn't available for comment late Monday. Joshi says the lawsuit is a billing dispute that will be resolved and won't stop or slow his plans to install "Star Trek: The Experience" at Neonopolis. The Experience had an 11-year run at the Hilton that ended Sept. 1. Later that year, Joshi revealed an agreement to revive the attraction at Neonopolis. Joshi says a new version of the attraction could open in 2010.
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